Why Indian Stock Market is Falling down?

 

Experts say there is a rumor that the Indian banks' Q4 results may fall short of market expectations. The Q3FY25 results season was quite disappointing, and the market was unable to process this news given the existing circumstances, which resulted in increased selling in the Indian stock market on Friday. Banking stocks account for 30% of the Nifty 50 index's strength, and this decline is what caused the Nifty 50 and Sensex to decline.

Uncertainty Over Trump’s Tariff Policies

Fresh U.S. tariff concerns added to the market volatility. On Thursday, Donald Trump announced new tariffs:

25% tariffs on Canadian and Mexican imports (effective March 4, instead of April 2).

10% tariffs on Chinese goods.

A reaffirmation of 25% tariffs on European Union imports.

These unpredictable trade measures have created uncertainty for global markets, including India.

Impact of MSCI Index Rebalancing

The upcoming MSCI index reshuffling is also pressuring Indian markets. Anshul Jain, Head of Research at Lakshmishree Investment and Securities, explained that the rejig is causing fluctuations in trade volumes and fund flows, prompting both FIIs and DIIs to adjust their portfolios.

Concerns Over GDP Data

Investors are cautious ahead of India’s December quarter GDP data, which is set to be released after market hours on Friday. Analysts expect a rebound in economic growth, but concerns over slowing corporate earnings and foreign outflows continue to weigh on sentiment.

Reluctance Among Domestic Investors (DIIs)

Despite Foreign Institutional Investors (FIIs) aggressively selling stocks, Domestic Institutional Investors (DIIs) have not stepped in to support the market as they have in previous downturns. Avinash Gorakshkar of Profitmart Securities noted that DIIs are stuck at higher levels and are waiting for more clarity on market trends before making any major moves.

Pressure on IT Stocks

The global sell-off in technology stocks hit the Indian IT sector hard.The Nifty IT index plunged 3.2%.

Persistent Systems, Tech Mahindra, and Mphasis fell up to 4.5%.The drop followed a sharp decline in Nvidia’s stock on Wall Street, triggering a sell-off in AI-related companies, including the “Magnificent Seven” tech giants.

Strengthening US Dollar and Capital Outflows

The US dollar index climbed to 107.35, nearing multi-week highs, as trade war concerns fueled demand for safe-haven assets.A stronger dollar makes foreign investments more expensive, leading to capital outflows from emerging markets like India.

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7 of the world’s 10 worst-performing bank stocks are in India

Seven of the 10 worst-performing bank stocks globally are from Asia’s third-biggest economy, data compiled by Bloomberg show. There are likely to be more dark days ahead as the lenders, already battling with the world’s highest soured debt, face fresh challenges to their asset quality from the slowdown in economic growth and the lingering crisis at the shadow banks. 

“It’s a double-whammy for lenders as a slowing economy has added to their existing woes with asset quality and fund-raising plans,” said Pritesh Bumb, an analyst at Prabhudas Lilladher Pvt. in Mumbai. 

At the top of the heap, of course, is Yes Bank Ltd., which has seen its shares crash 70% this year on concerns about the lender’s thinning capital buffers and its sizable exposure to the cash-strapped shadow lenders. 

While Yes Bank last week raised about $273 million selling shares to large investors, the market remains jittery about its holding of pledged shares. The stock is down over 25% this week after CG Power Ltd., in which the bank owns a 12.8% stake, on Tuesday raised red flags over “suspect, unauthorized and undisclosed” transactions. 

IDBI Bank Ltd. leads share price losses among state-run lenders, having slumped by about 60% this year. The bank’s provisions for bad loans have risen for seven straight financial years through March 2019, forcing it to set aside 192 billion rupees ($2.7 billion) last year -- an amount that almost equals its current market value. 

Source- Economic Times 

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